Stocks rise against backdrop of trade worries.

Both domestic and international stocks climbed in July, with U.S. large caps leading the pack. Market volatility was light, apart from Facebook’s big drop. Although tariff threats were still being lobbed back and forth — with some tariffs already in place — economic news was pretty good, too.

What happened.

July was a positive month for stocks both in the U.S. and abroad. U.S. large-cap stocks led the way, with the S&P 500 up +3.72% for the month. Small caps were hot on their heels, closing up +3.16%. International stocks rose, too. Developed-market stocks returned +2.46% and emerging markets +2.20% (MSCI EAFE and Emerging Markets indices).

On the volatility front, it was a fairly smooth ride for stocks: The S&P 500 didn’t move up or down by more than 1% on any single day in July.

Government bonds were almost unchanged for the month, up +0.02%. Corporate bonds (which are issued by companies to raise funds), however, rose +0.72% as it became slightly cheaper for companies to borrow (Bloomberg Barclays US Aggregate and Bloomberg Barclays US Credit indices).

Events in July.

Economic news was largely positive during July. Second-quarter growth came in at +4.1%, a level not seen in four years. Jobs growth also was strong, despite an uptick in the unemployment rate. Interest rates rose slightly over the month, and the dollar was almost unchanged against a basket of foreign currencies.

This came against the backdrop of tariff threats flying back and forth across the world — especially between the U.S. and China. And some tariffs have been put into effect. For example, the U.S. has levied a tariff of more than 20% on newsprint coming from Canada and a 25% tariff on steel from most countries. The European Union has imposed tariffs of 25% on certain goods coming from the U.S. Not to be outdone, China placed tariffs of 25% on $34 billion of U.S. goods.

Trade tensions appeared to ease late in July, however, following a positive meeting between President Trump and the president of the European Commission, Jean-Claude Juncker.

Facebook grabbed headlines late in the month, falling 19% in one day. In this month’s sidebar we look at why it happened and the lessons it can teach us about the importance of a well-diversified portfolio.

What it means for you.

Your portfolio will probably be up for the month, as all major asset classes rose in July. Stocks returned more than bonds, which means the higher your percentage of stocks, the better your portfolio will have done. Remember that stocks are riskier than bonds, however. That’s why the further you are from retirement, the more risk your portfolio will likely take.

Because we build your portfolio specifically for you, the more you tell us about yourself — your goals, other retirement assets, and how comfortable you are with risk — the better we can tailor your investments to your unique situation. Please log into your Financial Engines account or call one of our advisors to make sure we have the information we need.


©2018 Financial Engines. All rights reserved. This publication is for informational purposes only and does not constitute investment advice or an offer to buy or sell any security. Future market movements may differ significantly from the expectations expressed herein, and past performance is no guarantee of future results. Financial Engines assumes no liability in connection with the use of the information and makes no warranties as to accuracy or completeness. Future results are not guaranteed by any party. Financial Engines® is a trademark of Financial Engines, LLC. Bloomberg Index Services Limited. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). BARCLAYS® is a trademark and service mark of Barclays Bank Plc (collectively with its affiliates, “Barclays”), used under license. Bloomberg or Bloomberg’s licensors, including Barclays, own all proprietary rights in the Bloomberg Barclays Indices. Neither Bloomberg nor Barclays approves or endorses this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith. All other intellectual property belongs to their respective owners. Index data other than Bloomberg is derived from information provided by Standard and Poor’s and MSCI. The S&P 500 index and the S&P SmallCap 600 Index are proprietary to and are calculated, distributed and marketed by S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC), its affiliates and/or its licensors and has been licensed for use. S&P®, S&P 500® and S&P SmallCap 600®, among other famous marks, are registered trademarks of Standard & Poor’s Financial Services LLC, and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. ©2018 S&P Dow Jones Indices LLC, its affiliates and/or its licensors. The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used to create any financial instruments or products or any indices. The MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages.